Rethinking Health Insurance

Overview:

The cost of health care is driving a difficult dilemma — Few of us can take the risk of a major illness or injury which can often be many thousands of dollars, yet health insurance that offsets this significant financial risk can be very expensive. The combination of a High Deductible Health Insurance plan along with a tax favored Health Savings Account (H.S.A.) can be a sensible middle path; Health Insurance for major medical situations while the Health Savings Account allows you to set aside your own money for routine or future medical costs. If you are self-employed and are paying for your own health care insurance coverage, this can be a path to affordable medical insurance that still provides important financial protection. An H.S.A. qualified High Deductible Health Insurance policy still has the substantial protection of a major medical plan, just not the “low-end” benefits. Don’t be fooled by “Cheap” Health Insurance or “Affordable Healthcare” plans that limit benefits that you might need and still leaves you vulnerable to catastrophic medical expenses.

Rethinking Health Insurance
Rethinking Health Insurance

Two Parts:

Health Insurance Component. A High-Deductible H.S.A. compliant health insurance contract.
Savings Account Component. A tax advantaged “Health Savings Account.”
It is important not to confuse the two components.

The High-Deductible Health Insurance: It is your backstop to protect you from the financial risk of a major illness or severe injury. The health insurance contract completely stands on its own but is a prerequisite for the tax advantaged Health Savings Account. These insurance contracts are really misnamed. You can indeed have a H.S.A. compliant health plan with a range of deductibles and maximum out-of-pocket limits. Insurance companies offer a range of “H.S.A. compliant plans” with different features within the IRS rules — just find a plan that makes sense for you. Be sure that any plan you select is labeled as H.S.A. compliant or compatible. Very few of us can afford the health care costs of an illness such as cancer, heart attack or a severe injury. These costs can run into the hundreds of thousands. My older brother’s struggle with Lymphoma, for instance, resulted in over $500,000 in health care costs over two years. A High-Deductible Health Insurance is often lower cost because you are not buying the “low-end benefits” but it still offers financial protection similar to any “Major Medical” health insurance plan beyond the maximum out-of-pocket. This is a critical component to this overall health care finance strategy.

The Health Savings Account: An optional, tax advantaged savings account that you can use to set aside your own funds toward future medical costs. You are required to have a High-Deductible Health Insurance plan to take advantage of this exceptional tax deal. In 2009, the maximum contribution to your H.S.A. is $3000 for an individual account ($5950 for a family account) plus a “catch-up” contribution of an additional $1000 for people age 55 or more. This contribution limit is adjusted for inflation by the IRS each year. One of the very important advantages of the Health Savings Account is how broadly you can use the funds for health care expenses while retaining the tax savings. Examples are over-the-counter medicines, eye glasses, dental expenses and more. A second important advantage of a Health Savings Account is the tax impact. Essentially, the money you set aside in a tax year in this special account and then either retained or spent for qualified medical costs is reduced from your taxable income. A third very important benefit is with a Health Savings Account, if you don’t spend the money contributed, you keep it. What you contribute this year and don’t spend is retained for future health care expenses. Don’t confuse the H.S.A. with a “Health Reimbursement Account” (H.R.A.) which you may have had with an employer sponsored plan.

Core Advantages:

Lower health insurance cost. Why pay for benefits you don’t use?
Insurance protection for a major injury or illness. The “major medical” insurance protection of the High Deductible Health plan is a critical component.
Tax Savings. Optional but productive tax deal with the Health Savings Account.
Broad Eligible Expenses. Your H.S.A. funds can be spent for many different qualified health care costs.
Use it or Keep it! Money you set aside in your H.S.A. can be spent for qualified medical bills but is retained if you don’t use it.
Is it a Good Fit?

This health care financing strategy, a High Deductible Health Plan paired with the Health Savings Account, is a good fit for many folks but not everyone. Here are the criteria that I want my clients to consider:

Can I qualify? Normally, you have to be in good health before the health insurance company will make you an offer.
Can I save? This strategy is better for folks that are willing to save for future health care costs.
Can I decide? This strategy is better for folks that want to make choices on what to buy with their health care dollars.
Can I spend? For this strategy to work safely, you have to be willing to spend your money when you need to for necessary health care expenses.
Summary:

I purposely have not focused on the tax rules, plan details, etc. Most folks get caught up with this extensive detail and become completely confused. The big picture is what I want you to see — This can be a great deal! — Buy health insurance for the catastrophic risk only and self-insure your normal health care costs with contributions to a Health Saving Account. You save on your insurance costs, save on your taxes and have an overall better outcome.

How To Reduce Property Tax Now

Property tax reduction has become a big concern with Americans all over the country. Because taxes are rising across the United States of America despite the steepest drop in home values since the Great Depression.

Recently home values have dropped almost 20%, but at the same time, property tax collections across the United States have gone up a little over 3%, according to the United States Bureau of Economic Analysis.

Our governments both state and local collect more than 400 billion dollars in property taxes annually. It’s the highest it’s ever been. One of the main reasons is that the laws in most states that prevent big tax hikes when real estate values go way up, also prevent big tax drops when values drop.

Delayed appraisals are also what’s keeping taxes up while home prices are dropping. Pennsylvania has some counties that have not done major reappraisals for decades. They are not alone. Elsewhere, home owners must pay taxes on peak values for years before new assessments reflect the dropping prices.

WHAT’S HOLDING YOU BACK?

Taxes are a big expense for all homeowners. Usually at least $3,000 a year. To reduce this large expense, the property owner should review and consider appealing their taxes once a year. While there is no guarantee you will win your appeal, a recent survey indicated that 70% of real estate tax appeals are successful. So if you have a seventy percent chance of winning what’s holding most people back?

Out of sight out of mind. Most real estate tax payments are done by mortgage companies. Since you are not writing that large check each month, you might not feel the sting of the payment directly. Here are some other common reasons people don’t try to reduce their property taxes.

1. The process seems intimidating and they do not know how to appeal.

2. They do not think they will win their appeal. A victim of the You can’t fight City Hall Syndrome.

3. They think their home’s assessed value is below market value and there is no basis for appealing.

4. They do not know that they can appeal on unequal appraisal.

5. They are busy and simply do not want to take the time to put in an appeal to reduce their property taxes.

WHY SHOULD YOU APPEAL?

The typical appeal hearing takes less than an hour. And most property tax appeals are resolved at the informal hearing which is the first step you take in the appeal process. Consider an appeal for a $150,000 house where the property taxes are reduced by 5%. This would reduce the assessed value by $7,500 and the property taxes by $225, based on a 3% tax rate.

YOU HAVE TO TAKE ACTION TO WIN

Three dozen residents in Sandy Springs, Georgia, were fighting a proposed expansion of the local school. They also filed a property tax appeal to get up to a 12% reduction in their property tax. They based their appeal on the increase in school traffic and inconvenience that it caused. Claiming that the before and after school traffic created a nuisance to the neighborhood.

One woman organized an email campaign, asking neighbors who were interested in exploring the traffic situation to lower there property taxes. They went to the County Board of equalization and presented their case. The board members said that they were shocked that there were not more residents there to present their case. The Homeowners who appealed got between a 4 and 12 percent reduction in their tax bills.

SOME STEPS YOU CAN TAKE RIGHT NOW TO GET LOWER PROPERTY TAXES

1. County assessors often use the drive by technique when assessing residential real estate. So you should look for obvious errors in the description of your house in the official records, such as incorrect age, square footage, condition or acreage. If you find a mistake, document it with blueprints, surveys, photographs and inspection reports.

2. Compare the assessed value of your house with the assessments on similar homes in your neighborhood. This is public information and is available at your local property tax assessor’s office.

3. Get a real estate agent or your assessor to give you a list of all the sales within the past 12 months in your neighborhood. Identify three to six homes that are similar to yours and located near your property.

You can get lower real estate taxes. One survey showed that only 7% of people ever appeal their real estate taxes. Imagine what it would be like to lower your property taxes and have hundreds even thousands of dollars extra to spend on you and your family. It can happen but you have to take action. Don’t wait. You’ll wait your life away.

About Health Insurance Premiums

When one engages in any type of insurance as a policyholder, he or she is doing what economists call risk management. In order to hedge oneself from a certain risk-fortuitous or otherwise-a premium is paid to another entity that will indemnify when it does happen by pooling together resources. Such events can come in the form of contraction of an illness, a debilitating disease, and a disabling accident. Individuals who wish to be shielded from the heavy toll of these events, not just on the body, but also on the resources, acquire one or two health insurances or medical plans.

In principle, the fee or the premium is determined by the risk severity and frequency. The premium is likely to be higher for those whose health risks are assessed to be serious, probable, and recurring. This explains why health insurance premiums tend to be more expensive for those who are buying at their old age. People who smoke, drink, and take drugs may have difficulty securing a medical plan, or, they pay a large sum for a premium. Sometimes, those who are engaged in extreme sports or hobbies are unable to get one, unless their activities are excluded from the insurer’s list of accidental losses.

The US government will have medical plans for those with disabilities, as well as for those who are already 65-years-old, above. Since social health insurance works around the principle of resources pooling in order to provide coverage, the person insured will have the advantage of lower premiums despite predictable and probable losses. A certain degree of stability is also guaranteed, because the risk is shared both by the government and the citizenry. Of course, health insurance of this type also provides a wide range of accredited physicians and clinics, extending to all states.

However, the limited coverage of the public health insurance may be appealing to many. There are those who go for private medical plans that have wider coverage in terms of health risks, to include chronic and debilitating diseases, which may require prolonged hospitalization and treatments. Some insurers allow their clients the flexibility of choosing their preferred and trusted doctors and hospitals, an attractive feature of this health insurance. Inclusion of health of the immediate family members in the coverage is also possible, for an extra fee. As one may have already observed, private medical plans are costly, and perhaps a luxury these days.

While insurance has been highly commercialized, evolving into many forms to suit every person’s needs, there is still the old school of self-insuring. To manage risks and possible losses in the future, people are satisfied with just saving their money in the bank, instead of paying health insurance premiums. But factoring into the equation the rising inflation ever year and the minuscule interest that the bank gives, the funds deposited will decrease in value over the years. Like investment, it is wise to not put all the eggs in one basket. Self-insuring may be continued, but alongside, an insurance policy must also be secured and enforced for a better hedge in the years to come.